Litigation funding – a new trend that could lead to an increase in litigation against companies as the hurdle of litigation costs can be defrayed by cutting others in on the proceeds of a successful litigation (although the legality of these types of arrangements remains an issue):
Several publications, including The Economist, The Wall Street Journal and Crain’s Chicago Business, have recently highlighted the increase in third-party litigation funding. This attention likely stems from the outsized returns that early entrants are reporting and the arrival of new competitors in the field.
In a third-party funding scenario, outside investors offer to fund a lawsuit in exchange for a share of the payout, which can range from 30 to 60 percent. Such investors run the gamut from hedge funds to more traditional financing sources. Australia and Canada have already been experiencing a surge in litigation funding, particularly in the class-action arena.
[Read: Litigation: Are lawsuits the newest commodity? at InsideCounsel]